Why Ryan Cohen’s Nordstrom stake is ‘quite different’ from other campaigns: Expert

John C Coffee, Adolf A. Berle Professor of Law and Director of the Center on Corporate Governance at Columbia Law School, joins Yahoo Finance Live to examine the impact of Ryan Cohen's stake taken in Nordstrom and the greater activist investor environment in early 2023.

Video transcript

DAVE BRIGGS: All right, Nordstrom rallied today after a report that activist investor Ryan Cohen took a big stake in the company. The retailer just the latest target of activist investors. It's grown broadly this year, caused largely by beaten down share prices. Names from Disney and Salesforce to Hasbro have been at the center of it all. For more on this, let's bring in Columbia Law School Professor John Coffee. Nice to see you, sir. So let's start with Mr. Ryan Cohen. What is he after here, and do you think he'll succeed?

JOHN COFFEE: Well, his campaign is quite different than the others. When you look at Norman Peltz and Trian going after Disney or Salesforce being attacked by-- actually more than one-- Elliott Management and Star Value, those are the classic engagements. The distinctive feature about Mr. Ryan Cohen's attack is that he doesn't have the capital to take over Nordhaus. And the family of-- the Nordhaus family owns over 30% of the stock. That is an obstacle that means you can't just run over them and win a proxy fight.

His strategy has to be to convince the Nordstrom family that he can save their company, that they have to work together. But so far, he's not indicated his strategy. All he's told us is he wants to get one director off the board, someone who used to be the CEO of Bed, Bath & Beyond, which is now bankrupt, and put himself or his own candidate on the board. That's not a strategic move. That just tells you he's beginning to approach, but his strategy is not yet clear. The strategy is very clear when we talk about Peltz going after Disney or Salesforce being under attack.

They also have had declining sale prices for a number of years. And they have major plans to sell off assets. For example, at Disney, there were some who want to spin off ESPN, which is very valuable. But it may be more valuable outside of Disney. This is different. It's distinctive. And we'll have to see how it plays out.

SEANA SMITH: John, what do you make of the uptick that we've seen in a number of activist investors getting involved with companies when it comes to Salesforce, Disney, now Nordstrom? Is that a trend that you also think is going to continue?

JOHN COFFEE: Well, recognize that the common denominator here is a lot of these stocks fell and have fallen for years, partly as a result of the pandemic, partly as a result of other changes. But all retailers had problems with their supply chain. And most of the major media companies are still hung up over what to do with streaming or AI. And they don't have clear visions for the future that shareholders understand.

DAVE BRIGGS: So why do you think, broadly speaking, this trend is spreading so fast? Is it just because how beaten down stocks were in '22?

JOHN COFFEE: Well, low stock prices attract in activists. Activists don't go after the highest priced stocks. They can't get them up very quickly. They hope that if they announce a new campaign, they can get maybe a 5% or 6% jump just on the first day. And generally, the activists doesn't stay around for more than a year or a year and a half. They're looking for some kind of quick change that the market will put a positive value on.

SEANA SMITH: So John, when it comes to Disney with Nelson Peltz, when it comes to Salesforce with Elliott Management, do you think those-- in those two situations, will we actually see change as a result of the activist investor pressure that we are currently seeing today?

JOHN COFFEE: Well, they have a strategy. If they implement it, it probably will have some impact. That is the idea of spinning off ESPN is exactly the kind of major change that the management of a company doesn't want to give up on their prized asset. But it's also possible that their prized asset would be worth more outside of the conglomerate of Disney traded on its own. And that will be debated. I'm not going to tell you what to do with ESPN or what to do with Hulu, but those are major strategic questions that are under debate.

SEANA SMITH: They certainly are under debate and a debate that we will continue to watch here. John Coffee, thanks so much.